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The Borrow & Build Inc. has an outstanding bond with the par value of $1,000.00, 10 years to maturity and annual coupon rate of 9%. The required rate of return on this particular class of bonds is 8%.
a) What is maximum price you are willing to pay for this bond?
b) What are the current (interest) yield and capital gain yield on this bond? What happens to yield-to-maturity, current yield and capital gain yield when this bond approaches its maturity?
c) This bond has a clause that it may be recalled in 3 years for $1,150.00 What is this yield to call on this bond today? Interpret it. Explain why this bond may be recalled?
What annual withdrawal will allow real retirement spending to remain approximately equal, assuming savings of $1,000,000 invested at 8%, a 25-year horizon, and 4% expected inflation?
You are told the WACC for the following firm is 7.95 percent. The company pays no dividends. What is the beta for the company’s stock? Debt: 100,000 bonds with a par value of $1,000 and a quoted price of 112.30. The bonds have coupon rate of 6.1 perc..
Marsha wants to have $1 million in her 401(K) in 30 years. She wants to invest $5,000 a year into the 401(K). About how much more than $5,000 a year will she need to invest each year to meet her goal of $1 million if all investments can earn 8%?
Calculate the bond's price if the market rate increases by 50 basis points (0.25 percent semiannually) using the present value formula from Chapter 6. Calculate the bond's effective duration assuming a 50 basis point increase or decrease in market ra..
Which of the following alternatives would increase the spontaneous liabilities of the firm.
As of today, the First ECON Bank of Austin currently holds: If we assume that that entire amount of the transaction deposits is a subject to the legal 10% reserve requirement, please indicate the required course of the bank’s action to manage its liq..
Red Company purchased an apartment building on November 1, 2015, for $7,000,000. Determine the cost recovery deduction for 2015. Pink Corporation purchased a business asset (seven-year property) on October 18, 2015, at a cost of $30,000. This is the ..
The present value of a lump sum of money that will be received in the future ________ the longer you have to wait to receive the money and _________ as the discount rate (opportunity cost rate) increases.
A firm pays a $9.80 dividend at the end of year one (D1), has a stock price of $137, and a constant growth rate (g) of 5 percent. Compute the required rate of return (Ke)
a company buys 1 00000 units of material called m every month. order costs are rs. 200 per order and carrying costs are
What is the forecasted percentage change in the boliviana if the spot rate is used as a one-year forecast? What is the forecasted percentage change in the boliviana if the one-year forward rate is used as a one-year forecast?
You are the head of finance department in XYZ Company. You are considering adding a new machine to your production facility. The new machine’s base price is $10,900.00, and it would cost another $1,970.00 to install it. What is the initial cash outla..
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